Rethink on GCV-based coal price

Thursday, Jan 19, 2012

The Ministry of Coal has decided to review the controversial gross calorific value (GCV) mechanism for pricing coal in the country, raising hopes of power companies.

Coal India implemented the GCV mechanism from January 1, which calculates the price of coal on the basis of heat produced by burning it. Earlier, prices were fixed on the basis of moisture and ash content present in coal.

Prices of coal have risen due to this yardstick, and industry is finding it difficult to pass on the cost of the expensive fuel to end-consumers. Indeed, power companies say they have seen their fuel costs go up 40% under the new pricing mechanism.

“We were told by power and other companies about the increase in fuel cost due to this new pricing mechanism. There is some issue with the prices of coal under different categories. We will look into the issue on January 28 with an experts’ group,” said Sri Prakash Jaiswal, Union minister for Coal, said on Wednesday.

Earlier, industry representatives from Chhattisgarh, Andhra Pradesh, Karnataka, Jharkhand, Orissa and West Bengal met coal secretary Alok Perti last week to take up the issue.

While most of the country uses the GCV mechanism to price the black fuel across the industry, Coal India did so only after recommendations by the T L Shankar Committee and also the Integrated Energy Policy document of the Planning Commission.

A non-profit organisation, Howrah Ganatantrik Nagarik Samity, had also filed a PIL in the Calcutta High Court accusing the company of making abnormal profits by repeatedly raising prices.

(sourced: DNA)